Facebook goes shopping for $1 billion e-commerce software startup Kustomer
Facebook has set its sights on another $1 billion prize: A startup customer relations software company called Kustomer that the social network plans to acquire to boost its e-commerce offering.
On Monday, Facebook announced its intentions to buy New York City-based Kustomer, in a deal that could be worth up to $1 billion, according The Wall Street Journal, which first reported on the acquisition. Facebook still needs to pass all the regulatory hurdles to finalize the deal, and it is already laying the ground work for that likely tense process.
“Kustomer is one of many solutions in this arena,” said Dan Levy, Facebook’s VP of ads and business products, in a blog post co-written by Matt Idema, chief operating officer of WhatsApp. “And we’ll continue to support the numerous options that businesses have to integrate their CRM platform of choice with our messaging services.”
Facebook has been under regulatory scrutiny over past acquisitions that have given the company considerable power within social media, including its $1 billion purchase of Instagram in 2012 and $19 billion purchase of WhatsApp in 2014. This year, Facebook offered $400 million for Giphy, the GIF-creation startup, in a deal that hit delays overseas with the regulatory approval process in the U.K.
Facebook’s interest in Kustomer comes as the social network looks to expand its position within e-commerce, which is a highly competitive space, especially among social media platforms. Chinese-owned TikTok has been making strides connecting its services to sales opportunities, and Snapchat has been making similar moves. There is an opportunity for social media sites to become more integrated with direct sales.
What is Kustomer?
Kustomer is a customer relationship management software platform used by businesses that are coming of age online. Clients include The Farmer’s Dog, Untuckit, Away and Bulletproof. Facebook upgraded its e-commerce products this year by opening Shops, which are digital storefronts on Facebook and Instagram. It has also opened shopping sections, with Instagram put a shopping tab at the heart of the app this year.
“The deal is part of Facebook’s pivot to a new business model to facilitate interactions between brands and customers through enhanced customer service,” says Thomas Husson, VP and principal analyst at Forrester.
Forrester highlighted Kustomer as a “contender” in its “New Wave” report in April, comparing it to other companies in the digital-first customer service sector. The leaders in the space were companies like LivePerson, Nuance Communications and 7.ai. Kustomer was seen as strong in its strategy, while needing help developing its services, which could come from the support of Facebook.
Kustomer could also help with Facebook’s continued interest in chatbots as ways for businesses to communicate with consumers. Chatbots are operational on Messenger and WhatsApp, and are becoming a key mode of maintaining relationships with customers and customer service.
In October, Kustomer announced a partnership with Instagram, integrating its customer relations platform with Instagram Messaging.
Addressing data concerns
Facebook has already addressed consumer data concerns that could come with the acquisition. “Kustomer businesses will continue to own the data that comes from interactions with their customers,” the Facebook execs said in the blog post on Monday. “Facebook eventually expects to host Kustomer data on secure Facebook infrastructure. In doing so, Facebook will act as a service provider at the instruction of business customers. This is an industry standard practice among many companies that offer service solutions.”
“With our complementary capabilities, we will be able to help more people benefit from customer service that is faster, richer and available whenever and however they need it—via phone, email, text, web chat or messaging,” Brad Birnbaum, CEO of Kustomer, wrote in a blog post on Monday, announcing the deal. “In particular, we look forward to enhancing the messaging experience which is one of the fastest growing ways for people and businesses to engage.”